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University of Phoenix closing half its campuses

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Shares in Apollo Group Inc., the largest U.S. for-profit college chain, hit a five-year low Thursday after the company forecast lower revenue and announced plans to close 115 campuses—half its total—and cut 800 jobs.

Stock in Apollo, which operates the University of Phoenix, has dropped more than 59 percent on the year, making it the worst-performing stock in the Standard & Poor’s 500 Index.

Fewer students are signing up to attend Apollo and other for-profit colleges amid high U.S. unemployment and federal and state investigations raising questions about the schools’ loan defaults and marketing claims.

It wasn't clear whether the University of Phoenix campus in Indianapolis off Interstate 465 near the Castleton Square Mall would be among those closed. Company spokespeople have not specified which campuses will close, and they did not return a phone message Thursday morning.

The local campus had enrollment of 3,000 in the fall semester.

Apollo’s results demonstrate that investors should avoid the education industry, said Peter Appert, an analyst with Piper Jaffray & Co. in San Francisco.

“Education stocks are value traps, burdened by a downward bias in estimates, limited enrollment visibility and increasingly intense competitive dynamics,” Appert, who has a neutral rating on shares, wrote in a note to investors.

Apollo shares were trading at $20.88 each on Thursday morning after a 20-percent drop on Wednesday.

A Bloomberg index of 13 education stocks slid as much as 8.4 percent, the biggest drop in more than seven months.

For the year ending in August 2013, sales will be $3.65 billion to $3.8 billion, Phoenix-based Apollo said in a prepared statement. Analysts on average projected revenue of $4.07 billion, based on estimates compiled by Bloomberg.

Over the past year, enrollment at the University of Phoenix fell 14 percent, to 328,400 students.

The company said it will take steps to reduce annual operating expenses by at least $300 million by 2014. It will close 115 University of Phoenix locations, including 25 campuses and 90 smaller centers.

The company will continue to operate 112 locations. Apollo is also cutting 800 jobs over the next fiscal year, according to the statement.

“We’re positioning ourselves to be more nimble, more competitive and more successful for all of our stakeholders in Apollo,” CEO Greg Cappelli said on a conference call with analysts.

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  • well deserved fall from grace
    The University of Phoenix did pioneer the delivery of education in non-traditional formats, which non-profit and public institutions are now incorporating into their offerings, but the truth is that the quality of the education that Phoenix offers, including many substandard instructors, and the lack of preparedness on the part of many of its students for college course work (as evidenced by a 5% graduation rate), is greatly inferior to anything that can be obtained to an education in the traditional sector.
  • Job Loss
    800 jobs will be lost and students will have less choices for education. I don't see that as a good thing. Traditional universities are not right for everyone. Schools like University of Phoenix give folks an opportunity that they might not have elsewhere.
  • RICO
    Yeah Paul, when lower tuition costs trickles over into the Public colleges it will be a good thing. Since 2000 Indiana Public Universities have doubled tuition and created barriers so Indiana taxpayers and their children cannot attend by setting up systems design for out of state/country students. The state should sell off the assets and give taxpayers the proceeds and let these universities befall the same fate of Phoenix!!!
  • Good thing?
    Of course it sounds bad, but when you think of how many people won't be saddled with tens of thousands of dollars of debt without great job prospects, is it not such a bad thing? Nobody was happy when housing prices started to drop, but once the pain has subsided, aren't we as a country better off with lower housing prices? Is this a sign that a decrease in the cost of education might actually be just around the corner?

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